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A flexible points system could generate more debit card loyalty

Many U.S. financial institutions are starting to experience a decline in transaction account ownership and debit card usage. This trend is concerning for banks and credit unions alike, particularly in light of the fact that the decline in account ownership is specifically more common among wealthier and younger populations.

Slow debit card growth

There seem to be several factors contributing to slower debit card growth. The move to EMV chip cards was expected to bring higher debit card usage since reissuance tends to trigger top of mind popularity for the consumer again. That hasn’t been the case, but the news isn’t all bad for debit card usage. Rewards programs are highly effective at driving debit card loyalty with participants more likely to use their debit card if it is attached to a rewards program.

Some financial institutions have let their rewards programs fall by the wayside in light of increasing operational costs associated with managing them. Add in the expense of EMV over the past two years, and the overall decline in revenue, and it’s not hard to understand why many have discontinued their rewards programs. Nonetheless, points based reward programs are effective, and should be streamlined or restructured rather than abandoned. Especially when used to strengthen the relationship between the institution and the consumer.

Points based debit reward programs

One of the most effective rewards program models is a points based system, where the account holder is rewarded for performing certain behaviors that strengthen the relationship between the financial institution and the cardholder. Points aren’t reserved solely for debit card purchases, but are expanded to include certain one-time activities like opening an account or downloading a mobile app. And, points can even be awarded for recurring activities like bill pay and direct deposit. Offering rewards for multiple behaviors, in addition to debit card usage increases a customer’s awareness of their point balance, and incentivizes further point accumulation. But more importantly, it reinforces their relationship to the bank or credit union.

With a points based reward system, a financial institution can shift point values and reward levels to achieve desired consumer behaviors and accommodate fluctuating budget concerns. In this way, multiple facets of a financial institution can benefit from the same rewards program, strengthening the overall relationship between the institution and the customer. The point values and reward levels can also be altered to reinforce targeted promotions for products, behaviors, and services.

Merchant-funded debit networks

Many financial institutions use merchant-funded debit networks to offer cash back or discounts on certain purchases from a merchant sponsor. It’s one way of alleviating the cost of a rewards program, since the merchants essentially pay for the rewards. Keeping cardholders interested in the products and discounts takes a significant amount of effort and may not be as effective with younger cardholders, but financial institutions that implement a strong rewards program typically see significantly less churn than others.

Worldpay offers a highly customizable, yet easy to manage rewards system for financial institutions of all sizes. Contact us to learn more about what you can achieve.